The first week of a month usually packs in lot of economic reports and events and February was no different. Here is the economic review of major events and reports. The first half of week’s reports are discussed here.
Asia & Oceania
Retail Sales m/m missed Down Under, on Thursday (local time). Australian Bureau of Statistics reported that retail sales rose a seasonally adjusted +0.2% m/m in December to $23.81B. It was more than last month’s +0.1% but below the forecast of +0.3%.
Australia’s Housing Industry Association’s (HIA) New Home Sales showed a decline of -1.9% for December from last month.
On Friday, RBA released its Monetary Policy Statement, which mentioned easing of Chinese growth. It also expects a ‘a bit below trend’ GDP growth. Experts see little hints of further rate cuts.
$XJO-ASX - Weekly - 02-06-2015" width="300" height="136" srcset="https://i1.wp.com/www.marketremarks.com/wp-content/uploads/2015/02/XJOASX_150206_W.png?resize=300%2C136 300w, https://i1.wp.com/www.marketremarks.com/wp-content/uploads/2015/02/XJOASX_150206_W.png?resize=1024%2C466 1024w, https://i1.wp.com/www.marketremarks.com/wp-content/uploads/2015/02/XJOASX_150206_W.png?w=1280 1280w" sizes="(max-width: 300px) 100vw, 300px" />Australia’s benchmark index, S&P/ASX 200, powered through the week, gaining +4.1% and reached the highest level since May 2008. On weekly chart it is forming a bullish formation with a breakout from a cup-with-handle like pattern. Next resistance is near 5981, which is 2.8% away from current levels.
Australian dollar, on the other hand, vacillated first going down and then rising only to close the week with a modest gain of +0.4%.
German Factory Orders m/m, at +4.2%, beat the market expectations of +1.4% and last month’s -2.4% reading. It is a leading indicator of production. Though the recent reading is up and a positive surprise, the trend is still not bullish or significantly improved.
It wasn’t much for the euro, though it rose to 1.14988 but is still in a downturn and is making a bear flag formation. For the week, euro was up by +0.3% but it does not paint the true picture and the currency pair is showing weakness.
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Germany’s market index DAX, made all time high during the week. Fore the week, DAX gained 1.4%. The three-month gain has been 16.7%. For the past 12-month period, the index gained 16.6%, which means that it was underperforming before the last three months.It wasn’t much for the euro, though it rose to 1.14988 but is still in a downturn and is making a bear flag formation.
UK’s Change in the price of homes financed by HBOS, Halifax HPI m/m grew at +2.0%, better than the estimate of +0.1%. It is a leading indicator of housing industry’s health. the year/year trend is up since December 2012, though it is plateauing for the last few months.
Still, the Bank of England held the interest rates at 0.5% for the 71st month in a row and it also kept its quantitative easing program unchanged. Last month GDP grew at slower-than-expected +0.5% rate. The inflationary pressures are not ticking up too. Taken together, this indicates that the bank will not raise rates till next year.
On Friday UK also reported that its trade balance for the month of December was -£10.2B. The expectations were for a reading of -£9.0B. Previous month’s reading was revised down to -£9.3B from -£8.8B.
British pound declined against the US dollar on Friday, though a large share of its decline needs to be attributed to the strong U.S. employment report. It had risen earlier in the week. It still closed the week 1.2% higher.
EUR/GBP, pound’s other big trading partner, declined for the week. It is in a strong down trend reflecting the relative weakness of euro.
London’s benchmark index FTSE-100 rose 1.5% for the week. Unlike German index, FTSE is laboring since mid-2013 to overcome the resistance zone created by the 2007 top, which is also just below 2000 top. Week’s action has taken it to the upper limit of the horizontal channel that it has been making since May-2013. For the week it closed just above the 2007 high. A break above this level will be highly bullish.
On Friday, Swiss National Bank announced its foreign currency reserves. In January, the reserve grew by CHF3.3B. In December, the reserves had grown by CHF32.4B, which may have been a big factor in SNB decision to remove the euro-peg.
Swiss also reported retail sales y/y, which surprised on the upside by growing +2.2% versus the forecast of +0.4%. Prior month’s reading was revised up to -0.6% from -1.2%. The trend, however, is still to the down side.
For the week Swiss Market Index, SMI, was up 2.4%. However, it is bouncing off a steep -15.5% decline induced by the euro-peg removal. Swiss franc gained +0.7% against the dollar. It has so far recouped 65.3% of the 2,817 PIP decline that it suffered due to SNB’s action. EUR/CHF gained +0.8% for the week. So far it has recouped 53.4% of the 3,513 PIPs that it lost in January.
On Thursday Canada reported a m/m trade balance of -0.6B compared to the forecast of -1.2B. This is a reflection of declining crude oil and other commodities that Canada exports.
Friday was the employment day in Canada. The change in number of people employed in the month of January was +35.4K. This was better than the estimate of +4.7K and last months reading of -4.3K. The unemployment number stayed the same at 6.6%, better than the forecast of 6.7%.
However, the numbers within the reports paint a different picture. The full-time employment fell by -11.8K and the part-time employment ticked up by +47.2K. The labor participation rate is 65.7%. The report is good considering that oil sector had been bleeding jobs. But, the report is also not as good at the headline number due to fall in full-time employment.
The initial reaction in USD/CAD was positive and the Canadian dollar appreciated by 60 PIPs against the US dollar. But subsequent report analysis brought it down and it closed the day 90 PIPs below the pre-report levels (USD/CAD closed up). For the week, Canadian dollar still closed up against the U.S. dollar by 1.6%.
In the month of December, the building permits issued by Canada increased by 7.7% m/m, better than the forecast of +4.8%. The number had dropped drastically in the previous month to -13.6%. Toronto’s S&P/TSX Composite Index rose 2.8% for the week. It is trying to overcome a resistance level created by the November 2014 high. A break above that increases the probability of it testing the September 2014 high of 15685, which is 4.0% above current levels.
On Thursday, the unemployment claims surprised on the upside. For the previous week, the claims rose by 278K compared to expectations of 287K. It is higher than the week before but the 4-week average trend is still down.
The Preliminary Nonfarm Productivity q/q for the fourth quarter of 2014 was -1.8% on annualized basis versus the forecast of 0.3%. Productivity and labor-related inflation are directly linked. A drop in worker’s productivity means higher cost. Generally businesses pass the higher costs to consumers, which is inflationary.
The trade balance for the month of December disappointed. The actual difference between imports and exports was -46.B, more than the forecast of -38.2B and prior month’s reading of -39.8B. Nevertheless, the 12-months change in the trade balance is showing a down trend. Declining oil prices is positive for trade balance but a strong dollar is negative.
The Big Kahuna of the week was the Non-Farm Payroll report by the U.S. Labor Department. It reported, based upon employers survey, that in January, U.S. added 257K jobs, more than the forecast of 236K. The Bureau of Labor also revised up December’s numbers by 77K to 329K.
The unemployment rate, which is based upon household survey, was 5.7%, a tick above last month’s 5.6%. The household survey still showed an increase of 435K in January.
The past 12-months employment change was over 3 millions. The trend is also decidedly up as the attached graphs shows.
The jobs growth in the employers survey was good across all industries. Manufacturing sector added 22K, construction 39K, retail 45.9K, restaurant34.6K and health care 38.3K.
The average hourly earnings m/m grew by +0.5% in January versus forecast of +0.3% and prior month’s decline of -0.2%. This is equal to 12 cent jump in average hourly pay. This seems to be an erratic movement in the series and the annualized change is around 2.3%. The year-over-year trend is sideways hugging the 2.0% line, mostly staying below it as the accompanying graph shows.
For the week, Dow Jones Industrial Averages closed up by 3.8%; S&P 500 rose by 3.0%; NASDAQ Composite closed up by 2.4%; and Russell 2000 rose by 3.4%.